FCA merger waiting on shareholder buy out

The shareholders’ meeting held at the beginning of the month voted in favor of the merger between Fiat SpA and its US subsidiary Chrysler Group LLC, but the company now needs to wait and see if the process will ultimately complete as planned.

Even as the needed majority – two thirds of the voting rights – was successfully met, Sergio Marchionne, the chief executive of both automakers, needs to wait and see how many of the opposing shareholders will opt out of the company. The Italian law gives them the right to ask Fiat to buy them out – as the company moves to become headquartered out of the country.

“The more the stock drops, the more it increases expectations of more people selling out, which in turn increases the number of people selling,” says a Milan-based trader.

“The completion looks as if it will be very close given 15 percent of shareholders did not vote in favor,” adds ISI Group analyst Arndt Ellinghorst in a report. “We estimate it will only take 5.18 percent of shareholders to exercise their cash exit rights to scupper the transaction.”

On the other hand, according to Marchionne, the eventual sell off will not actually prevent the merger, but merely delay it and the investments they had planned under the five-year business plan presented back in May.